With the explosive growth in the Internet over the past several years and the rapid increase in the number of consumers with access to the World Wide Web, there has been a great deal of interest in the development of electronic commerce on the Internet. Traditional financial transactions are being transformed. In particular, possibilities for the use of smart cards are expanding.
Also termed chip cards, integrated circuit cards, memory cards or processor cards, a smart card is typically a credit card-sized plastic card that includes one or more semiconductor integrated circuits. A smart card can interface with a point-of-sale terminal, an ATM, or with a card reader integrated with a computer, telephone, vending machine, or a variety of other devices. The smart card may be programmed with various types of functionality such as a stored-value application, a credit or debit application, a loyalty application, cardholder information, etc. Although a plastic card is currently the medium of choice for smart cards, it is contemplated that a smart card may also be implemented in a smaller form factor, for example, it may attach to a key chain or be as small as a chip module. A smart card may also be implemented as part of a personal digital assistant, telephone, or take a different form.
A smart card contains a hardware encryption module for performing a variety of encryption algorithms. Encryption may also be performed in software. Applied Cryptography, Bruce Schneier, John Wiley & Sons, Inc., 1996 discusses suitable encryption algorithms and is hereby incorporated by reference. Various mechanical and electrical characteristics of a smart card and aspects of its interaction with a card reader device are described in Smart Card Handbook, W. Rankl and W. Effing, John Wiley & Sons, Ltd., 1997, which is incorporated herein by reference.
One possible use of a smart card by a consumer is illustrated in FIG. 1. FIG. 1 illustrates an environment 100 useful for issuing smart cards and reconciling transactions performed with such a card. A terminal supplier 102 builds the equipment used by a service provider 104 to provide goods and/or services to consumers having a smart card at a service payment terminal 50. Card Supplier 106 contracts with an integrated circuit manufacturer and a card manufacturer for integrated circuits and plastic card bodies, then embeds the integrated circuits into the cards and initializes them with a serial number. It then delivers the cards to card issuer 108. In conjunction with clearing and administration system 110, card issuer 108 personalizes new cards and then transfers these cards to individuals (cardholders 112). The cardholder may then charge the card with value prior to use. Alternatively, the card may come with value already loaded. Cardholder 112 may then use the card at a service payment terminal 50 to purchase goods and/or services from service provider 104. Terminal 50 then debits the value from the card, thus creating a service payment. System 110 may be implemented using VisaNet, an existing global clearing and settlement system provided by Visa International Service Association of Foster City, Calif.
Periodically, all transactions are sent in a data file from terminal 50 via an acquirer 114 to clearing and administration system 110 along with accumulated service payment batches from other terminals. Based upon this collection data, clearing and administration system 110 then receives money from card issuer 108 that had originally come from cardholder 112. Clearing and administration system 110 then transfers a lump sum to acquirer 114 using a suitable settlement service (such as one provided by Visa International) to pay the various service providers having a relationship with acquirer 114. Based upon the previous collection data, acquirer 114 then transfers an appropriate amount of money to each service provider 104 reflecting the value of the goods and/or services that that service provider had provided that day to cardholders based upon deductions from their smart cards.
A consumer typically uses such a service payment terminal 50 in a face-to-face environment in order to purchase goods in a store or directly from the terminal itself. Service payment terminal 50 can be an attended device or it can be integrated into a self-service device such as a vending machine or public telephone. For example, the service payment terminal may be incorporated into a soda machine in order to dispense sodas to a customer in which the customer pays by inserting the smart card. Or, the service payment terminal may be a point-of-sale terminal such as is found at a check-out counter where a consumer inserts his smart card in order to purchase goods.
Such a service payment terminal 50 allows a consumer to use a smart card for the payment of goods and/or services, generates a payment result from a transaction, and bundles individual payment results into a collection for transfer to a clearing and administration system, which then transfers funds that had been debited from a consumer's smart card to the merchant whose goods and/or services had been purchased from the terminal.
Thus as described above, a variety of goods or services may be purchased using a smart card from a merchant having a service payment terminal on the premises. In addition, a consumer with a smart card may purchase goods or services from a merchant over the Internet using a technique such as described in U.S. patent application Ser. No. 08/951,614 by Davis et al., filed Oct. 16, 1997, entitled “Internet Payment Using Smart Card” which is incorporated by reference.
In order to purchase something, however, the card must be loaded with value first. Value can be loaded onto a stored-value card in a variety of ways. It may be inconvenient for a consumer to load value onto his or her smart card. A consumer must physically travel to a bank or other institution that has an automated teller machine (ATM) or other similar device in order to load value on to his or her smart card. The consumer can insert money into the machine and have a corresponding value put onto the smart card, the consumer can use a debit card to deduct value from the consumer's account at the bank for transfer to the card, or a credit card can be used as the source of funds to be transferred to the smart card. In either case, the consumer must travel to the bank to load value. Further creating difficulty is that not all banks or other financial institutions have such a machine for loading value onto a consumer's smart card.
A technique to allow a user to conveniently and easily load value onto a smart card over the Internet is described in U.S. patent application Ser. No. 09/070,488 by Davis et al., filed Apr. 30, 1998, entitled “Internet Loading System Using Smart Card” which is incorporated by reference. It is desirable in some situations, however, to be able to use such payment and loading systems without having a physical smart card.
The successful development of such systems described above is somewhat dependent on the deployment of two hardware components new to the mass consumer market: smart cards and smart card readers (either stand alone or integrated with some form of personal electronic device such as a mobile telephone or computer keyboard). Both represent relatively new technology which raises the issues of reliability, cost, market acceptance and distribution. Although the above-described systems could technically be implemented, the lack of a large number of smart cards and card readers in public use raises certain infrastructure difficulties.
As mentioned above, the above-described systems have many benefits for electronic commerce. As cash may not be an option in many situations, the above systems offer a compelling solution for merchants selling products or services on-line that in the physical world might have low monetary value. The deployment of such systems, however, is hampered by lack of smart cards and smart card readers. This problem is further exasperated by the fact that the card reader market is not well developed from a standards perspective raising the potential for significant interoperability issues. Simply put, a practical problem exists in that without large numbers of smart cards and card readers in use, there is no great demand from consumers, and hence it is more difficult to convince merchants to use such systems.
Therefore, it would be desirable to have a technique that would quickly and easily allow consumers and merchants to use the above-described system, but without the need for physical smart cards and smart card readers to be distributed and installed. Such a technique would provide a fast, inexpensive alternative for users of the above-described systems to address the electronic market opportunity. Such a technique would also allow merchants and issuers to establish a market presence that would facilitate the acceptance of smart cards and card readers when those hardware components become more readily available.